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What's a little corruption, kidnapping, and conflict in the face of 50% returns? That's what Global X is asking with its launch this week of an exchange-traded fund dedicated entirely to Nigeria. But do investors really need direct exposure to Africa's most populous nation? Probably not.

The MSCI Nigeria Index has gained 20% this year, even as the MSCI Emerging Markets Index has lost 1.5% and the MSCI Frontier Markets Index has gained 8.5%. Those gains come on top of last year's 50% return, making Nigeria one of the world's best-performing markets—and ripe for investors who want to bet on further gains.

They might want to think twice. Nigeria, while an OPEC nation and one of the largest frontier markets, is still a frontier market, with all that entails. Its stocks trade far less often than those in large emerging markets, and its political stability leaves much to be desired. And its rally has left it looking far more expensive than it was just one year ago. Nigeria has the potential to be one of Africa's winners, but will almost certainly cause investors headaches along the way.

"Is Nigeria a good opportunity," asks Sam Katzman, chief investment officer at Constellation Wealth Advisors, "or is it just going up on momentum?"

BUT THERE'S ALSO REASON for optimism. The economy is growing at a 7% clip, and the population is large, young, and increasingly middle-class. Nigeria has also taken steps to improve its productivity, by building out its infrastructure and improving regulation of the electricity industry in order to address power shortages. Elections are scheduled for 2015, which could give the nation a further boost if they go smoothly.

For now, at least, those positives could trump the risks, says Morgan Harting, a senior portfolio manager at Alliance Bernstein. "It's easy to come up with reasons to be concerned," he says. "As long as things don't trend worse, there can continue to be upside."

What worries him? Valuations. Thanks to the big gains, Nigeria is no longer cheap. The MSCI Nigeria Index has a price/earnings ratio of 13.4 based on the last 12 months of earnings, versus 11.5 for the MSCI Frontier Index. And some stocks are trading well above that level. Nigerian Breweries (NB.Nigeria), which has risen 62% during the past year, has a P/E of 32.4, up from 18.7, while Nestlé Nigeria (Nestlé.Nigeria) has a P/E of 35.6, up from 19.7, after gaining 130%. They're the fourth- and seventh-largest positions in Global X's new ETF. "They're not the kind of bargains you find in other frontier markets," Harting says.

The ETF is also loaded up with bank stocks—27% of its portfolio is in First Bank of Nigeria (FBNH.Nigeria), Guaranty Trust Bank (GUARANTY.Nigeria), and Zenith Bank (ZENITHBA.Nigeria)—and financials make up 40% of its holdings. That, says Steve Malin, director of research at Wealthstream Advisors, is reason enough to worry: "It's not as diversified as would make me comfortable."

Put it all together, and investors might be better off looking elsewhere, says Morningstar's Samuel Lee—even if it means missing out on more gains. "Even if it were the best-performing, I'd worry about the investment merit," Lee says. "Nigeria? Come on."